India’s Forex Buffer Faces a Fresh Weekly Decline

Overview of the Reserve Decline

India’s Forex Buffer Faces a Fresh Weekly Decline: India’s forex reserves fell by USD 4.47 billion to USD 688.1 billion for the week ending 21 November 2025, according to the RBI. This decline came immediately after a strong rise in the previous week, indicating the impact of shifting global financial conditions.
The fall was mainly driven by lower valuations in gold reserves and foreign currency assets, both sensitive to global price and currency movements.

Decline in Foreign Currency Assets

Foreign Currency Assets (FCAs) remain the largest part of India’s forex holdings, and they dropped by USD 1.69 billion, settling at USD 560.6 billion.
Changes in FCAs occur due to movements in major currencies such as the euro, pound, and yen, as the RBI’s portfolio gets revalued against the US dollar.
Static GK fact: India’s forex reserves touched an all-time high of over USD 645 billion in 2021, marking a major milestone in external sector strength.

Fall in Gold Reserve Valuations

Gold reserves registered a sharp decline of USD 2.675 billion, reducing their value to USD 104.18 billion.
This drop indicates a likely softening in global gold prices or strategic portfolio rebalancing by the central bank to maintain stability.
Static GK fact: India is among the world’s top gold-consuming nations, with the RBI holding over 800 tonnes of gold as part of its reserve assets.

Changes in SDRs and IMF Position

Special Drawing Rights (SDRs) slipped by USD 84 million, reaching USD 18.56 billion.
This instrument, created by the IMF, changes in value based on the currency basket that defines it.
India’s IMF reserve position also saw a mild fall of USD 23 million to USD 4.75 billion, signalling routine adjustments in multilateral commitments.

Understanding Forex Reserves

Forex reserves help manage currency volatility, support essential import payments, and strengthen investor confidence during uncertain periods.
These comprise FCAs, gold, SDRs, and the IMF reserve position, forming a vital economic safety layer.
Static GK Tip: The first official foreign exchange reserves framework was strengthened under the Foreign Exchange Management Act (FEMA) 1999, replacing FERA.

Economic Significance of the Weekly Drop

Despite the weekly decline, India continues to hold one of the largest forex reserves in the world, ensuring a strong cushion against external risks.
The current dip highlights the impact of global revaluations, including currency swings and gold price corrections.
The reserves remain crucial for managing oil price fluctuations, mitigating capital outflow pressures, and maintaining stable macroeconomic indicators.

Static Usthadian Current Affairs Table

India’s Forex Buffer Faces a Fresh Weekly Decline: